Singapore Power International subsidiaries launch Arirang bond

Having developed the concept of the Kimchi bond earlier this year(Korean issuers raising US dollar funds in the domestic market), Salomon Smith Barney has set its sights on the Arirang sector (foreign issuers accessing the Won market) with a deal for SPI.

Following in the footsteps of Indonesia's Daesang Corp, which became the first foreign corporate to access the Arirang sector earlier this year, two wholly-owned SPV's of SPI have raised Won210 billion ($165 million). Prior to this the only foreign entity to tap the sector since the government first allowed issuance in 1995, was the Asian Development Bank (ADB) in September of the same year with a Won 85 billion issue.

A three-year deal for the two Singapore SPV's - SPI Seosan Co-Gen and SPI Seosan Water - was formally priced yesterday (Wednesday) with a coupon of 7.68%. Proceeds have been swapped back to US dollars to re-pay a shareholders loan from SPI via SPI Korean Capital. 

Bankers calculate that by tapping the won rather than dollar market, the two have saved roughly half what it would have cost in the international market. This is based on the fact that the two have paid roughly 6.5% on a swapped basis, but would have had to pay upwards of 12% given the credit's implied double-B rating.

The rating is derived from the local triple-B rating (which roughly equates to an international double-B rating) of Samsung General Chemical to which the two companies have offtake contracts to supply power and water to one of its plants. These contracts are their sole assets.

Although the deal was formally priced yesterday, it was placed with investors last Friday. This is because once an Arirang issue (named after a Korean bird) has been filed with the Financial Supervisory Commission (FSC), it takes 15 days to clear.

Legal advice on the deal was given by Shearman & Sterling Stamford and Kim & Chang.

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